> On Tue, Mar 4, 2008 at 5:14 PM, Saunders, Brock wrote:
> No problem….was just trying to think of solutions to regain liquidity in the credit market and provide some support for the USD.
My original proposal was for the Fed to reduce capital requirements for any bank absorbing its SIVs. And at the same time prohibit any new ones. The bank shareholders still are at risk of defaults, and this lets the sivs get absorbed, financed, and eventually mature. It costs the Fed nothing.
The Fed could at the same time accept them as collateral at TAF auctions once the capital issues are sorted out. The liability side is not the place for market discipline with a modern banking system.
To support the $ first you have to get Paulson to let the rest of the world know their cb’s are not outlaws or currency manipulators if they buy $US. That would help reverse the $ and help our standard of living. Fundamentally the $ is fine, it’s public the weak $ public policy that’s driving formerly happy holders to other assets.